Kathmandu, November 12:

To avoid possible financial catastrophe, Nepal Rastra Bank (NRB) today formally intervened in the ailing Nepal Bangladesh Bank Ltd and took over its management, effective from Sunday afternoon.

Following a board meeting of NRB on Sunday, the central bank moved in decisively to takeover the management of NB Bank and assigned a four-member management team led by Maha Prasad Adhikari, director at NRB’s Bank Supervision Department.

Other members of the new management team include Bhisma Raj Dhungana, Keshav Bahadur KC and Sachin Jung Rayamajhi.

Threatened by the possibility of going bankrupt due to panic withdrawals by its clients, the NB Bank management on Saturday had approached the central bank for taking over its management.

All the board members of NB Bank also tendered their resignations en masse on Saturday.

“Today onwards the NRB will run the bank. We will put all our efforts to make it financially viable and retain its lost credibility,” said Rabindra Prasad Pandey, executive director at NRB, Bank Supervision Department.

He also disclosed that despite repeated warnings and scores of directives, NB Bank management did not comply with the banking norms.

According to Pandey, the central bank has been closely watching the NB Bank for the last four years and necessary directives have also been sent out from time to time. “Poor governance is the major problem behind this failure,” he said, adding that a large amount of loans taken by the promoters is yet to be repaid.

Though Pandey did not disclose the loan amount taken by the promoters, he firmly said the NRB management would take all steps to recover the loan within the stipulated time and safeguard customers and shareholders’ interest.

“The new management team would start reform and restructuring activities,” said Maha Prasad Adhikari, coordinator of the management team. He said the new team would do its best to protect depositors and shareholder rights. “Customers can withdraw all their money if they so desire,” he added.

The NRB team would put its efforts to regain the lost glory of NB Bank and take any step to make it a financially viable and competent commercial bank, Adhikari promised. He also said that the previous management and board would also come under scrutiny.

Thousands of depositors thronged all the branches nationwide of the bank after reports that NB Bank board and management misused bank resources, putting depositors’ money, amounting to around Rs 13 billion at risk.

The run on the bank started after reports surfaced that about Rs 2.0 billion was withdrawn in the last three days.

The bank is a joint venture of Nepal’s NB Group and IFIC Bank, Bangladesh and has share equity of Nepali shareholders. The bank’s non-performing loan (NPL) is estimated to be at an alarming position 25 per cent and its total net worth is reported to be almost negative.